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Trade Performance Ratings for Guidance; Link Goals to Strategy

SAN DIEGO—No one likes performance reviews. “They tend to look backward, they’re corrective in focus, tend to use demotivating goals and they’re not valued by managers,” explained Marsha Moulton, SHRM-SCP, executive vice president of human resources at ACDI/VOCA, an international development nonprofit organization based in Washington, D.C.

But getting rid of them is not the answer, said William Sparks, vice president, research and development at ACDI/VOCA. “It would be like getting rid of road signs, the very infrastructure employees need to travel to success. The annual performance review is a great tool, and something that we can turn into a concept,” he told attendees at the Society for Human Resource Management’s 2015 Talent Management Conference & Exposition.

HR’s most important contribution to a company’s strategy is performance management, said Moulton. “The ultimate purpose of a performance management system is to achieve organizational objectives. If you’re going to have effective performance evaluations, you have to reach organizational objectives, realize individual growth, reinforce company values and retain critical skills to remain competitive,” she said.

Ratings Are Ineffective

Ratings don’t work, said Sparks. “They’re too skewed to biases of the evaluating manager,” he said. “Saying you didn’t meet expectations doesn’t help to change your performance to actually get there. What you need is something to show where you are now and where you want to go and the guidance in between.” That concept—Now Plus Next—is what he said his company uses in reviews.

Moulton explained that HR can create two boxes, one for “Now” and one for “Next,” under each performance area being measured, such as job performance, teamwork or supervisory skills. Rather than use ratings, the Now box, or demonstrated competencies, would define what the employee did in relation to a certain behavior, for example: “Pat demonstrated an ability for improving customer service by traveling to their offices to support new product installation, which resulted in the customer expressing appreciation,” Sparks said. The Next box, or competencies for development, would show how Pat can improve her ability to service customers by documenting customer service guidance during the installation process, and the result could be shared with colleagues to improve collective service.

This method moves from ratings to describing and guiding, Sparks said. “Guidance is much more meaningful than receiving a 3.5,” he added. “Now Plus Next reinforces desired behaviors, addresses obstacles and lets people build on their talents.”

You’re no longer comparing people to other people, Moulton said. “You’re comparing someone to an internal standard, which takes away that competitive behavior which can work against an organization.” Now Plus Next also gets away from trying to correct people. “Because how often is that successful?” Moulton asked.

Set Discipline Goals

There are a lot of bad goals out there. “Attend a training on human resources,” “update the employee handbook” and “improve employee turnover” are all poor goals, Moulton said.

She explained that effective goals must be discipline goals. These goals focus on the ends, not the means, connect to a deeper purpose and guide professional development.

When an employee comes up with a goal, ask “Why?” five times, said Sparks. For example, if an employee sets as a goal “to attend an HR seminar,” ask “Why?” They might answer to “learn more about HR practices.” “Why”? They might say “to know more about compensation.” “Why?” “To update the employee handbook.” “Why?” “To reduce turnover.” And finally “Why?” To which they may respond “To improve my ability to attract and retain talent.”

“It sounds corny, but it works,” Sparks said. These types of goals make people think through what kind of professional discipline they are trying to develop and are not just a series of tasks, he said.

“Discipline goals will emerge out of the Now Plus Next boxes,” Moulton added. She recommended only developing two or three goals per employee per year. “If you have six or more goals for someone, it’s more than likely that they are not goals, but tasks,” she said.

Link Goals to Business Strategy

Ultimately, the individual’s goals must be linked to department plans and organizational strategy. “You have to make sure that you have alignment with the individual’s professional growth, which in turn helps the department achieve its objectives, which in turn helps the organization be successful,” Moulton said.

You must first have a clearly articulated organizational strategy map in order for employees to be able to relate their goals to the larger mission of the company, said Sparks.

“Linked goals connect every employee to the mission, make strategic planning real and not just a document to look at once a year, and support the collective progress of all employees at an organization,” said Moulton.